Share Incentive Plans

The Share Incentive Plan (SIP) is a scheme under which a company can award shares to its employees for free or employees can purchase shares on a tax-advantageous basis. Participation in a SIP must be extended to all employees rather than selected employees. There are four types of awards available:

• Partnership shares – which employees purchase out of pre-tax earnings.
• Free shares – which a Company can choose to award.
• Matching shares – where the Company can choose to award up to two matching shares for each Partnership share purchased.
• Dividend shares – where the dividends normally payable on the above awards can be converted into shares.

If the shares are held in the SIP trust for five years, this type of scheme delivers excellent tax advantages as no income tax or National Insurance contributions will be payable when the shares are withdrawn from the trust. Additionally, any gain in value whilst shares are in the trust will not be subject to capital gains tax.